Swot Analysis

Deloitte study in France shows that if OTA * commissions raised more than 30% between 2008 and 2012, hotels turn over only grows up 3%. That’s no longer sustainable. Initiatives such as LiveTheLife.TV* start questioning the OTA ‘s supremacy. We highlight the good, the bad and the ugly.

*OTA = Online Travel Agency / LTL = LiveTheLife.TV

Strenghts:

The majority of OTA’s offer a valid contribution to the industry for the customer and accommodation alike. Many hoteliers are good at marketing but do not have the budget (and time) to compare the likes of booking dot com, trip advisor etc… So they do earn a place in the mix. Above all, they offer exposure that goes unmatched by small independent players like LTL. Their market/distribution power is huge. They introduce your accommodation to 50 million+ people per month, bringing you brand recognition and 300 million+ user-generated reviews … Nearly half (49%) of travelers surveyed won’t book a property unless it has reviews. Source: forrester.com

A swot analysis and some dirty little secrets of the online travel agency industry.

- Yves VdM

Weaknesses:

They show little to no weakness. Dominating near 50% of the market. Important to note is that OTA’s have traditionally performed well during industry downturns when hoteliers are desperate for demand and will sacrifice higher costs to get it. As hotel performance reaches pre-recession peaks, owners, managers and agents can effectively shift their channel mix to lower-cost channels like LTL .

For every one booking accommodations get from OTA’s 1 to 3 people will book with the accommodation direct as a results of having seen them on the OTA.

Threats:

Obsession with price ? Sometimes that’s detrimental to the small business owner. Value should be the number one priority. Rate parity is also a big issue. Owners can no longer offer lower rates than the ones displayed on the OTA. Plus, they cannibalise organic (search) markets by bidding on your brand keywords. Owners and agents have to watch out to become overly dependant on major OTA’s. They risk having a one channel reservations policy. Are OTA’s fringing on a monopoly ?
Did we start a (brain)storm ? Highlighted the good, the bad and the ugly side of the OTA industry ? Not sure, but it’s a start. Here comes my favourite part of the blog post: the opportunities for you and me !
To work your way around rate parity, you can offer extras to customers. Create incentives for guests to book directly with you. Everybody knows that bookers find the accommodation via the OTA’s, then go direct to the owner’s website to see if they can get it cheaper. Rate parity, makes that pretty much impossible. So why not upgrade people with extra’s ? Overall, the biggest opportunity is to create a sound digital marketing strategy. So you are no longer overly dependant on OTA’s.

I want to shine some light on a very delicate subject : commissions & booking fees. Commission should not be paid on the full room charge, it would be more fair to charge it on the net rate as after all the VAT is not your money. Many online sites now also want a commission on breakfast, meals and drinks. A bid to squeeze even more. Clearly money in the form of high commissions is flowing out of the local communities. By paying a low, fixed, yearly fee to companies like LTL, you allow them to Live The Life and don’t feed a big corporate company with a near monopoly. It’s a more sustainable business model. And more fairer as we are not designed to steal away your direct bookings (costing you 15% + VAT). TripAdvisor will not display your details (unless you pay them a $5000 fee) because they are fully-owned by OTA’s. So are they truly unbiased ? They will however ask you to link to them, this seems a little bit one-sided. Recently they have become hard-nosed to remove bad reviews from guests that have not stayed at your accommodation and only advise to take legal action. Another well-known OTA offered to wipe out all the bad comments and stay on top of other hotels at the 1st page … with a 50% commission price tag !!!

Don’t get me wrong, I’ll repeat it, online agents do have a place in the mix. Why ? Because they spend all their time (and budget) marketing your place. Just think of the extra business they are bringing you, not to mention brand recognition. Some prefer to pay up to 30% commission on a booking instead off getting an empty room. For most it’s acceptable to pay for marketing. But many owners are a bit frustrated that commissions keep increasing, some say greed comes to mind, as OTA’s started with 8 to 10% and are now asking 20 to 30%+

While offline travel agents charge between 10 and 15% , these big online booking companies are now charging double that. But what viable alternative is there ?

Could we place a polite notice in the media just stating the facts ? The customer IS ultimately paying extra (higher) rates to cover these commissions. So, is the concept of “no booking fees” a bit of a … ? Well I won’t say the word. But I’m sure you get my point.

Opportunities.

FILTER: Sites like LTL offer an advanced filter to help you find what you are looking for. But above all we already pre-filtered all the best options based on price/value/service, top reviews, prime location and our own (life) style … Even more so, they are 100% based on the specific needs of the surf market. Who has time (and energy) to browse through 850.000 listings anyway. The ones we hand-picked are the one where we would love to Live The Life. Accommodations I would recommend to friends and family.

DIRECT BOOKINGS: Sites like LTL give the customer a choice of booking options and publish the business contact details without a fat $5000 yearly fee … I repeat, we will openly display your contact, website and social media details for any customer wishing to book direct ! A much fairer system by far and much better for customers who may wish to speak with you directly about their specific accommodation or catering needs. We only charge a low, fixed yearly fee of €120 to cover overhead costs to run our website.

REACH: Sites like LTL can never offer the exposure of a major OTA. But we reach your target market and extend your overall reach. On social media we reach up to 100.000 people per week, we got near 2 million pageviews so far and have send over 7000 clients to our partners. Through google ads we had exposure to 87 million eyeballs (50K budget). In some cases we even create new markets for your business, this is especially the case for LTL, but I’ll talk more about that in our 3th post.

COMMISSION: In the past decade, sites like LTL also charged between 15 and 30% commission. But times are changing and so are we. To celebrate our 10th anniversary and modernize our business model we will only charge 10% commission. So we are doing the exact opposite of the major OTA’s, instead of doubling our rates we are cutting them in 2.

RATE PARITY: We can’t compete with the big OTA’s on price but we can compete in terms of curation, content marketing and storytelling. And we look forward negotiating perks with our partners to give customers value by booking through our booking system. And yes make some commission, as our small yearly fee is calculated to cover some overhead costs but is not nearly enough to make a living and travel the world to document all the amazing places we have selected to live the good life … When they find your accommodation on our site and they prefer to book direct that’s fine too, at least we have some of our costs covered.

REVIEWS: It’s impossible for us to catch up with sites like tripadvisor, featuring 300 million plus reviews. However it was part of our dirty little secret formula to double-check if a certain listing should or should not be listed on our site. Our main goal regarding reviews is to make a full review, including photo and video shoot, of all the places we’ve listed on our network and keep track of the ongoing reviews on the OTA’s. And link to them.

PRICES & AVAILABILITY: It’s the dirty little secret in the world of OTA’s. No matter how you make your reservation, you always run a tiny risk of arriving at your hotel and finding it overbooked. If its software doesn’t properly hook up to the hotel’s electronic booking system, you don’t have the room the site claims you reserved. Booking prices are shown in your own currency but after booking you’ll often pay directly to the accommodation in the local currency, what OTA’s don’t tell you is that they negotiated with the accommodation a standard change rate 10 to 12% higher than the current rate. Another reason why direct bookings are hard to beat. People who commented on this issue in reviews got censored by the OTA’s. Another partner googled his BNB and a major OTA came up in the top search results. When he clicked it said his BNB is not available and the OTA suggested other BNB’s. I guess we could call that dirty little secrets of the OTA’s industry … but we can not ignore that the availability feature is a key element in the OTA’s success story, the biggest challenge is to keep them up-to-date , in real-time. Most off the time it does work it’s magic.